Wawrzynski v. H.J. Heinz Company: CAFC Jurisdiction and Preemption of State Law Claims

By Jason Rantanen

The primary issue in this case is whether the Federal Circuit has subject matter jurisdiction over the appeal.  On that issue, the court's analysis of the arguments presented by the parties is solid.  However, in addition to concluding that it lacks jurisdiction, the panel seemingly also rules on a substantive issue in the appeal: whether patent law preempts the plaintiff's state law claims for unjust enrichment and breach of implied contract based on its alleged use (without payment) of the plaintiff's creative ideas.  Without engaging in any substantive analysis, the court concludes that "nothing in federal patent law now stands in the way of Mr. Wawrzynski pursuing his state law claims," a result that is – at least based on the court's minimal discussion of the issue – difficult to reconcile with substantial Supreme Court precedent on the subject.

Wawrzynski v. H.J. Heinz Company (Fed. Cir. 2013) Download Wawrzynski v Heinz
Panel: Newman, Plager (author), Prost 

David Wawrzynski is an entrepreneur who owns his own food delivery company.  During the 1990's, he developed a method for dipping and wiping an article of food, such as a French fry, in a specially configured condiment package.  In 1997, the patent office granted him a patent, No. 5,676,990, for a "Method of Food Article Dipping and Wiping in a Condiment Container."  The sole drawing in that patent is below.

990 patentIn 2008, Wawrzynski sent a letter to the Heinz Company presenting his condiment packaging ideas (including his "Little Dipper" concept) and soliciting a meeting.  He included promotional materials that depicted a condiment package similar to the container depicted in the '990 patent and stated that the features of the "Little Dipper" were subject to his patent.  Heinz invited Wawarzynski to meet with his representatives to present his product ideas, which he did.  At that meeting, Wawrzwynski contends that he shared the idea of creating a "dual function" product that permitted a customer to either dip a food article or squeeze out the condiment.  Following the meeting, Heinz indicated that it was not interested in Wawrzynski's product ideas and did not wish to receive additional information from him.

A few months later, Heinz released its new "DIP & SQUEEZE" packet.  In a surprising coincidence, my wife happened to bring a couple of these items home on Friday so I took the following picture:

Heinz

On October 5, 2010, Wawrzynski filed a lawsuit against Heinz in Michigan state court. (Heinz removed on the basis of diversity jurisdiction.)  Wawrzynski's amended complaint contains two legal claims: breach of an implied contract and unjust enrichment based on Heinz's alleged use of Wawrzynski's ideas for condiment packaging.  The general allegations also reference the '990 patent. 

The case was subsequently transferred to the Western District of Pennsylvania and Heinz filed an answer and counterclaim alleging that it did not infringe the Wawrzynksi patent and that the patent was invalid.  Wawrzynski answered the counterclaim stating, among other things, that "Mr. Wawrzynski avers that there is no case in controversy regarding the ‘990 Patent because he admits that Heinz is not infringing on it."  He also provided Heinz with a covenant not to sue on the '990 patent.

During the district court proceedings, Wawrzynski filed a motion to dismiss Heinz's counterclaim and Heinz filed a motion for summary judgment on the ground that Wawrzynksi's non-patent claims were preempted by federal patent law.  The district court denied Wawrtzynski's motion, concluding that "Wawrzynski's admission and covenant were "manufactured" and did not change the fact that Wawrzysnki's complaint made allegations based upon the '990 patent."  Slip Op. at 5, quoting district court.  The court also granted Heinz's motion for summary judgment.  Wawrzynski appealed the district court's rulings.

No Jurisdiction: Under the Federal Circuit's jurisdictional statute, 28 U.S.C. § 1295, if the case arises under the Federal patent laws, the court has jurisdiction; if the case is one purely of state law claims, not involving a patent issue, it does not.  Although both parties contended that the Federal Circuit had jurisdiction, the court concluded that it did not.  Wawrzynski argued that the post-AIA version of Section 1295 applied.  Under this version of Section 1295, the court has jurisdiction over appeals in actions "in which a party has asserted a compulsory counterclaim arising under any Act of Congress relating to patents." However, the newer version only applies to actions commenced on or after September 16, 2011 and this action commenced before that date.  Nor did the date of Heinz's counterclaim (September 28, 2011) count; the AIA speaks in terms of the date the action commences.

The Federal Circuit also rejected Heinz's jurisdictional argument.  Heinz argued that Wawrzynski's complaint did, in fact, assert a claim of patent infringement.  But this was not the case.  First, under the "well-pleaded complaint rule," the plaintiff is the master of the complaint and can "eschew[] claims based on federal law [and] choose to have the cause heard in state court."  Slip Op. at 10, quoting Caterpillar Inc. v. Williams, 482 U.S. 386, 398-99 (1987).  Here, Wawrzynski's complaint raised only two causes of action, both based on state law.  Although it referenced the patent, "[t]he complaint does not have a count for patent infringement or anything similar."  Slip Op. at 10.  Ultimately, the court concluded that the "sparse background discussion of the patent does not make a well-pleaded complaint for patent infringement." Slip Op. at 12.  Based on this, the court ordered the appeal transferred to the Third Circuit.

The Preemption Puzzle: Despite concluding that it lacked jurisdiction, the panel nevertheless went on to apparently rule on the issue of preemption, or at least make clear its opinon on the subject.  I find the following three paragraphs particularly puzzling.  The court seems to hold that there is no preemption in a highly summary fashion:

We note that some of the issues underlying our jurisdictional analyses also underlie the district court's summary judgment merits analyses. To fully assess the question of our jurisdiction, we necessarily have analyzed and decided certain of these issues.
For example, we have concluded that the relief requested in the complaint aligns with state law claims and not a claim for patent infringement. We also found support for Mr. Wawrzynski's contention that certain of the ideas and materials he allegedly provided to Heinz are not found in his patent. These conclusions, along with our overarching conclusion that the complaint does not present a well-pleaded patent law issue, undercut conclusions relied upon by the district court to support its grant of summary judgment of preemption. Accordingly, it appears that nothing in federal patent law now stands in the way of Mr. Wawrzynski pursuing his state law claims.

With regard to the district court's finding of non-infringement of the ′990 patent by Heinz's ‘Dip & Squeeze®’ packet, Mr. Wawrzynski's responsive pleadings contain both a concession that Heinz's product does not infringe and a covenant not to sue. Thus, it would appear that in any event there is no case or controversy remaining to support a subsequent judgment on the issue of infringement.

Slip Op. at 13 (emphasis added).  Notwithstanding the court's rather cursory dismissal, however, patent law preemption of state law claims involving ideas and other intangibles is a  complex and challenging analysis (as my unfair competition students have learned over the past two weeks).  The central Supreme Court precedent is well known: Sears v. Stiffel, Bonito Boats v. Thunder Craft Boats, Kewanee Oil v. Bicron, and the circuits have struggled with issues of preemption for decades.  While it is conceivable that some of Wawrzynski's claims are not preempted by patent law, it seems at least equally plausible that many of them are.  Given the complexity and importance of this issue, it is surprising that the panel did not choose to either let the Third Circuit address the issue or analyze the issue itself in meaingful detail if it believed it was necessary to satisfy the approach described in Gunn v. Minton (which the opinion does not mention). 

41 thoughts on “Wawrzynski v. H.J. Heinz Company: CAFC Jurisdiction and Preemption of State Law Claims

  1. If I understand Professor Rantanen’s September 11th comment, and his initial post, he takes exception with the Federal Circuit panel’s statement that, “it appears that nothing in federal patent law now stands in the way of Mr. Wawrzynski pursuing his state law claims,” because it may be that patent law field pre-emption applies to at least the claim of misappropriation of the idea of a dual purpose container (for dipping or squeezing sauce). In other words, if this idea is protectable by a patent, then a suit for patent infringement is required as the exclusive means of redress for unauthorized use by Heinz, since in this case the inventor did not obtain a contractual confidentiality agreement from Heinz before disclosing the idea. As Professor Rantanen puts it, field pre-emption “would seem to block claiming state law protections over intangibles such as the idea of a dual-function condiment package [] assuming that there is no secrecy – trade secret claims are not preempted under Kewanee Oil v. Bicron.”

    He also notes that the marketing ideas divulged by Mr. Wawrzynski to Heinz (trademarks/slogans) would not be pre-empted by patent law, although he suggests these might fall under copyright express statutory pre-emption, rather than trademark pre-emption, which appears to me to be more apt. As he says, “For example, Heinz’s alleged use of the marketing materials would presumably not be preempted by patent law (there’s still copyright preemption however).”

    While I do not claim to be an expert in the idea misappropriation law of either Michigan (where the suit was filed) or Pennsylvania (where the suit was transferred), in California, where the action for idea misappropriation was first recognized in the state Supreme Court decision in Desney v. Wilder, the action is said to be based upon a quasi contract–in other words, a contract imposed by law to prevent unjust enrichment. (Some have said the action is based upon an implied contract derived from trade customs. But I doubt there is any trade custom in the condiments business like that in the movie business, where an idea is pitched to a producer with the understanding that if it is used the pitch-maker will be paid a customary sum.)

    There is no separate claim based upon unjust enrichment in California. Rather, disgorgement of ill-gotten enrichment is the remedy for the quasi contract breach.

    Thus, if this case were decided in accordance with California law principles, the inventor would have a single claim sounding in quasi contract, the remedy for which might be disgorgement to prevent unjust enrichment of Heinz. This claim might be partially pre-empted under a patent field pre-emption theory, if the idea for a dual use sauce container is patentable. This might leave the marketing ideas actionable, but it is questionable that any significant damages would be recoverable.

    Presumably, Heinz obtains profit (i.e. enrichment) from selling condiments in the patentable dual purpose container, not from the use of a trademark “the little dipper” or the appearance of packaging suggested to Heinz by the inventor as marketing enhancements. However, to the extent Mr. Wawrzynski could show some enrichment flowing to Heinz by virtue of the marketing ideas he supplied, he could force Heinz to disgorge those benefits.

    Perhaps the Federal Circuit should have more precisely said that it appears that nothing in federal patent law would stand in the way of Mr. Wawrzynski pursuing a portion of his one state law claim for misappropriation of marketing ideas.

    All in all, not a terribly appealing case for the plaintiff.

  2. I’ll give you the right to use my unpatentable algorithm described in my patent in exchange for $100.

    Enforceable?

    Hardly.

    That’s a different fact pattern from the one I’m discussing. You can’t enforce an agreement to sell me a “right” that I already have and which you don’t own.

  3. Jason, there was a recent trade secret case about an undisclosed so-called best mode.  We discussed that here on Patently-O.
     
    But I agree that if the subject matter is disclosed in the patent, or even obvious from it,  there should be no state-law remedy for its unauthorized use.
     
     

     
     
     

  4. These are fun issues. If you’re interested in learning more, I’d suggest reading Warner-Lambert v. John J. Reynolds, 178 F.Supp. 655 (S.D.N.Y), and reading a bit about the differences between the Restatement approach to trade secrets and the UTSA approach.

    But under the hypo as you initially described it, it would be very difficult to argue that the “secret” wasn’t destroyed by the disclosure, which rendered it no longer a trade secret – regardless of whether one was applying the Restatement approach or the UTSA approach. I could think of ways to do it, but they would all involve modifying the hypo (for example, to involve stuff that wasn’t disclosed in the patent, or changing the hypo to refer to an unpublished application rather than a published application/patent, or to have the parties enter into the contract before the secret was destroyed by disclosure).

  5. MM, I can see a cause of action if what was offered was, let us say, a collection of publicly available data for a price that essentially paid for one’s time to collect it.
     
    But, if “use” is what is involved, I think that might be preempted. Use is what is covered by patent law.
     
     

     
     

  6. MM, try this.
     
    I’ll give you the right to use my unpatentable algorithm described in my patent in exchange for $100.
     
    Enforceable?
     
    Hardly.
     
    But, why?

     
     

  7. a state law that would allow one sue for damages for use of information in the public domain?

    Why not? If Party A was not misled about the availability of the information, why can’t Party A bargain with Party B and, in exchange for consideration, promise to avoid using Information X in their operation for some reasonable period of time?

  8. A patentee has no right under state law, under any theory, to restrain use of anything described in his patents, or obvious variations.

    Again, we’re not talking about anyone relying on a “state law”, other than contract law, to “restrain anyone”. We’re talking about an agreement between two people wherein one person doesn’t do something in exchange for some consideration. As long as there is no antitrust issue, what possible difference can it make whether the act in question was described in a patent or any other document?

    Neighbor 1: I’ll give you a hundred dollars if you stop mowing your lawn with that loud machine every Sunday morning.

    Neighbor 2: Oh, I couldn’t possibly agree to that because this lawn mower was described in a patent.

    Seriously?

  9. Jason, I invent a new algorithm for adding numbers. I disclose it in my patent. I also disclose a molding process that uses the algorithm, and claim it.

    I then “privately” disclose the algorithm to company X with an expectation of payment for their use. They use it to improve their mining operations. There is no infringement.

    They learned it from me, indeed, but the information is in the public domain.

    Do you really believe that the Supreme Court would not find something fundamentally wrong with a state law that would allow one sue for damages for use of information in the public domain?

  10. ” few months later, Heinz released its new “DIP & SQUEEZE” packet”

    I realize the facts of this case aren’t relevant to this legal discussion, but I’d like to point out that large corporations don’t go from hearing of a fresh idea to product on-shelf in just 3 months.

    If this thing ever goes forward, I think the plaintiff will learn that HJH can show marketing notes and concepts from a year or more prior to their meeting with a bunch of prototypes just like the eventual product.

  11. MM, you need to read Kawanee.

    Secrecy is the sine qua non.

    A patentee has no right under state law, under any theory, to restrain use of anything described in his patents, or obvious variations.

    Most NDA’s exclude information publicly known. But that exclusion only recognizes that no one has any right under state law to stop another from using anything legally in the public domain.

  12. the patent system may in fact not be as pervasive as once believed.

    The law of unintended consequences may mean that ‘justice’ will find more and different paths to the courthouse with the diminishment of patent coverage – more lawsuits rather than less.

    I look forward to the future of rampant “trade secret trolling”.

  13. Thanks, Jason. I can certainly follow (and agree with) the logic of the Bonito Boats case, where a system of state laws “substantially interferes with the enjoyment of an unpatented utilitarian or design conception which has been freely disclosed by its author to the public at large.”

    But that logic doesn’t seem to apply here (1) the plaintiff admits that no patents are infringed and (2) where the state laws being relied on remove nothing intangible from the public domain (where it belongs) except for that which was (allegedly) freely contracted away by the defendant. The issue as to whether there was an implied contract between these parties doesn’t seem to be on that is (or should be) pre-empted by patent laws.

    Is it illegal for a first party to agree with a second party (with consideration) that the first party “will not do X”, where X is something that happens to be disclosed in a patent (so other members of the public are free to practice X)? That would also seem to be something for states to decide.

  14. I would further add that with the AIA, Congress explicitly notes that Trade Secrets and Patents co-exist, and while not directly on point to the immediate case and its facts, the co-existence does point out that the patent system may in fact not be as pervasive as once believed.

    The law of unintended consequences may mean that ‘justice’ will find more and different paths to the courthouse with the diminishment of patent coverage – more lawsuits rather than less.

  15. That’s a great question, and one for which I’m not aware of a clear answer. Would be a great issue for someone to look into and write about, though. There hasn’t been much (any?) scholarship on patent preemption for at least the last decade.

  16. Thanks Jason – in other words, the unclaimed material is the type of thing that could have been claimed.

    Does this need to be contrasted with the (apparently) shrinking domain of patent eligible subject matter, or with the notion that subject matter alone may not be determinative of jurisdiction (the heightened pleading standards)?

    Can the Supreme Court cases be read in a vacuum, or does the preemption field, similar to the EP notion of field of eligibility, change over time?

  17. The implied preemption here involves field preemption, which occurs when a legislative scheme is so persuasive as to occupy that entire area of law. That’s what the Court was holding in the preemption line of cases I mentioned in the post. Whether or not something falls within the scope of a specific patent’s claims is irrelevant. What matters is that it is the type of creative intangible that falls within the domain of patent law; as the Court referred to it in Bonito Boats “a utilitarian conception.”

    I think it’s fair to say that, read broadly, the allegations here might encompass things other than utilitarian conceptions. But to the extent the allegations reach patent eligible subject matter, they would appear to be preempted under the implied field preemption the Court discussed in Bonito Boats, Sears, etc.

  18. Ned,

    I did not miss you rpoint.

    I am not discussing your point.

    I am discussing your error in the assumption that you are making.

    Please re-read my very first post. Respond to what I actually wrote.

  19. I think you miss my point, anon.  The SC in Kawanee justified its holding on secrecy.  Subject matter disclosed in patents is protectable, if at all, only by means of a patent infringement case and by no other means.
     

  20. Correct Jason – but you also have something that does not fall under the patent protection scheme either.

    Now your point about other preemption (i.e. copyright) is interesting, but that appears to be a red herring to the simple point attempting to be reached: preemption under patent law simply may not reach these facts in this situation.

  21. You are missing the point Ned – the point that preemption cannot apply to non-claimed items, since non-claimed items cannot be the focus of a patent suit.

  22. anon, I don’t know what you are arguing about.  See Kawanee Oil link to scholar.google.com
     
    The SC authorized trade secret protection of patentable inventions because they were kept secret.  There is NO protection or possibility of protection under state law of subject matter disclosed in a patent.

     
     
     

  23. Ned – you are assuming the point to be proven (that is, that preemption does bar somethign that is not claimed, and thus cannot be brought in action in a patent suit).

  24. Just as with misappropriation or conversion of intangibles claims, breach of an implied contract and unjust enrichment claims based on creative intangibles are rife with preemption issues. Often copyright is used as the main vehicle for preemption, since copyright has an express preemption provision in the statute. But there’s also a well-established rule of implied field preemption based on patent law. Here’s one excerpt from Bonito Boats v. Thunder Craft Boats (1989) (which held that a Florida law relating to boat hull designs was preempted):

    “At the heart of Sears and Compco is the conclusion that the efficient operation of the federal patent system depends upon substantially free trade in publicly known, unpatented design and utilitarian conceptions. … While … our decisions since Sears have taken a decidedly less rigid view of the scope of federal preemption under the patent laws, … we believe that the Sears Court correctly concluded that the States may not offer patent-like protection to intellectual creations which would otherwise remain unprotected as a matter of federal law. Both the novelty and the nonobviousness requirements of federal patent law are grounded in the notion that concepts within the public grasp, or those so obvious that they readily could be, are the tools of creation available to all. They provide the baseline of free competition upon which the patent system’s incentive to creative effort depends. A state law that substantially interferes with the enjoyment of an unpatented utilitarian or design conception which has been freely disclosed by its author to the public at large impermissibly contravenes the ultimate goal of public disclosure and use which is the centerpiece of federal patent policy. Moreover, through the creation of patent-like rights, the States could essentially redirect inventive efforts away from the careful criteria of patentability developed by Congress over the last 200 years. ”

    Of course, patent preemption probably won’t block all of the plaintiff’s claims here. For example, Heinz’s alleged use of the marketing materials would presumably not be preempted by patent law (there’s still copyright preemption however). But it would seem to block claiming state law protections over intangibles such as the idea of a dual-function condiment package (assuming that there is no secrecy – trade secret claims are not preempted under Kewanee Oil v. Bicron).

  25. MM, the SC has allowed trade secret protection of patentable inventions in the absence of a patent.  It will not allow, I believe, trades secret protection or contract theories to protect patentable inventions disclosed in a patent regardless of whether they are claimed.   This would permit state law to protect unpatentable inventions disclosed in patents, something far more inconsistent with federal patent law than allowing state law to further protect inventions covered by the clams.

     
    State law can protect patentable inventions only to the extent they are kept secret.  If what is alleged to be the subject of misappropriate includes subject matter disclosed in a patent, the action is barred, IMHO, by preemption.
     

  26. Anon, preemption depends upon whether the exclusive remedy is by means of an action for patent infringement.  If the complaint alleges that one disclosed the subject matter of a patent to X and that one expects compensation for its use, that complaint IMHO is preempted and it makes no difference whatsoever that the patent holder has made unilateral statements that would bar him from suing for infringement under license, estoppel or the like.
     
     

  27. The plaintiff here does not appear to be making any claims of trade secret misappropriation. If there were, the preemption issue on those claims would be much simpler (Kewanee Oil v. Bicron largely settled that issue).

  28. Would not a non-disclosure agreement including trade secrets among other types of intellectual property cover this situation? Is it known if one was executed?

    If so there are both state AND federal laws covering trade secret misappropriation.

  29. I think you jump to the conlsuion of your ‘if so,’ when the courts evidently said ‘not so.’

    You are also not answering my question.

  30. If the state court were to allows a cause of action based on misappropriation of ideas disclosed in a patent, then that would be effectively a state cause of action for patent infringement and preempted.

    First, there is a big difference between ideas that were disclosed in a patent and ideas that were claimed in a patent.

    Second, a state cause of action for “misappropriation of ideas” would surely seem to have different remedies and defenses compared to a claim of infringement. I don’t see why pre-emption would follow necessarily even if the “misappropriated” ideas were described in the claims of a patent.

  31. anon, estoppel? I think one simply has to look at the disclosure and determine whether the subject matter of the complaint is disclosed or obvious over the patent disclosure. If so, patent law provides the exclusive remedy.

    I think this issue is a Fed. Cir. issue.

  32. Jason: While it is conceivable that some of Wawrzynski’s claims are not preempted by patent law, it seems at least equally plausible that many of them are.

    and

    Wawrzynski’s amended complaint contains two legal claims: breach of an implied contract and unjust enrichment based on Heinz’s alleged use of Wawrzynski’s ideas for condiment packaging.

    There’s two complaints. Which of these are “plausibly” pre-empted by patent law?

  33. Plager had a similar view of preemption and jurisdiction in the Lockwood v. Sheppard Mullin case a few years back. There, since there WAS jurisdiction, Plager thought there was also preemption. For him, those issues seem to lie almost on top of each other. Consider this chunk of the oral argument in Lockwood: “Isn’t there an inherent conflict between these state remedies and federal patent law for the very reason that you were able to get your state court decision saying that state courts couldn’t handle this case? Because there is a substantial—and the very reason you have jurisdiction under federal law at all— because there’s a substantial question of federal patent law, involved in this case. And that is a matter that ought to be decided exclusively by the federal courts, or by the federal agency and not by state courts. Isn’t that the inherent conflict that’s in this case?”

  34. Ned, Do you feel that a Monsanto-style estoppel prevents preemption based on the assertion of what the patent holder says are features (under suit) that are not covered by the patent?

  35. If the state court were to allows a cause of action based on misappropriation of ideas disclosed in a patent, then that would be effectively a state cause of action for patent infringement and preempted. The question becomes, I think, whether the ideas claimed to be different are more than colorably different.

    If not, the claims are preempted.

  36. The consequences of not taking an hour to draft a new application and paying 50$ to file a provisional before your meeting.

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